"Fed, Banks and Potential For Rapid Contagion" Lawrence Lepard
Lawrence Lepard: Fed, Banks, and Potential for Rapid Contagion
Palisades Gold Radio: 6-26-2023
Tom welcomes Lawrence Lepard from Equity Management Associates back to the show. Lawrence discusses the rivets on the global economy that are continuing to snap. We have had a number of bank failures in a matter of weeks, part of a larger pattern going back years.
We are seeing large commercial mortgage failures and companies walking away, and Lawrence believes more pain is yet to come in the banking sector, with one to two trillion in write downs. The Fed is likely to intervene once again, and something is likely to break soon.
Lawrence discusses the U.S. debt maturities, and how the U.S. government soon will have to pay over a trillion to meet its obligations annually. The math arguably doesn't work, and the Fed is trapped.
The market will force them to pivot at some point, and they will do whatever they can to hold the system together. He explains why it is important to hold money that can't be printed, like gold, silver, or bitcoin.
He advises to take the long view and recognize why you are holding it, as in the context of saving your wealth, since things could break quickly.
Gold, silver, and Bitcoin could move rapidly in a crisis. Some of the problems could be improved by increasing the money supply. But in a debt based system, there is no going back.
Consumers are feeling the pinch and borrowing more from credit isn't a long-term solution. He discusses which age groups are most at risk in a downturn.
Boomers hold significant amounts of real estate and equities, and when they realize that inflation is staying, where will they move their capital to preserve wealth? The world has not yet adapted to the new paradigm of high inflation.
There is a multi-generational buying opportunity in the gold stocks, and many holders are tired of the market. If you are a contrarian, you realize people will wake up and these stocks will take off. We must understand the inevitable nature of what is coming.
When the system comes unglued, there may be no time to get out. Silicon Valley Bank collapsed in hours, and it is entirely possible things could unravel rapidly and at scale.
Time Stamp References
0:00 - Introduction
1:00 - Financial Problems
5:15 - U.S. Debt Maturity
7:06 - Rate Levels & Risks
13:13 - Bond Mkt Volatility
15:34 - Sentiment & Miners
16:24 - Fed Mistakes & CapEx
21:37 - Money Supply Growth
23:47 - Inflation & Consumers
27:52 - Foreign Tres. Demand
30:18 - Wealth Demographics
34:35 - Gold Miner Chart
39:00 - Summer Doldrums
41:50 - Rapid Contagion
47:16 - Wrap Up
Talking Points From This Episode
- The global economy is continuing to snap, with one to two trillion in write downs likely, and the Fed likely to intervene soon.
- Investors should hold money that can't be printed, such as gold, silver, and bitcoin, in order to protect their wealth in a crisis.
- Boomers are particularly at risk in a downturn, and there is a multi-generational buying opportunity in gold stocks.